According to Bank South Pacific Financial Group Ltd, foreign exchange (FX) liquidity has increased since the second quarter of the year, owing to robust commodities prices mixed with project-specific and donor foreign currency inflows (BSP).
The PNG Kina has stayed constant versus the US dollar for the third consecutive quarter, according to the bank's Pacific Economic and Market Insights Q3 2021 Report, although FX reserves at the end of June increased by 7% quarter on quarter, owing to favourable inflow.
According to the report, overall foreign exchange reserves were US$2.49 billion (about K8.5 billion) as of June 30.
In June, reserve balances rose 7% quarter over quarter, with positive inflows overcoming the Central Bank's monthly intervention of $50 million (about K171.6 million).
While FX liquidity increased by 17% in September, BSP Group general manager for treasury Rohan George noted FX turnover increased by 18% during the previous six months, owing to robust commodity prices, particularly for oil, copper, palm oil, and coffee.
“Firmer commodity prices, combined with increased project-specific and donor foreign currency inflows offset the lost FX market inflows from the closure of the Porgera gold mine,” he said.
“Momentum in FX market turnover is likely to increase into year’s end. Outstanding FX orders have increased from low levels seen in June, and this is expected to continue in October and November with pre-Christmas import orders.
“We expect large foreign currency inflows in late November and December to satisfy any foreign currency backlog.
“And to manage reduced FX liquidity, businesses should place FX orders (with correct documentation), as soon as possible, ensure orders are cash-backed whilst awaiting execution, tax clearance certificates are current and reflect the expected FX order execution time,” George added.
“It was also reported that the kina has been stable and unchanged against the US dollar for the past 11 months; however, the pullback in the AUD/USD (Australian dollars/US dollars), amid Coronavirus (Covid-19) related weakness in the Australian economy, strengthened the Kina/AUD, and the Australian dollar is expected to outperform into year’s end as the Australian economy opens up.”
Reference: The National (1 November 2021> “FX liquidity rising in Q3: BSP”
